Huang v Dawson Builders Ltd
[2017] NZHC 1444
•27 June 2017
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV-2017-425-000016 [2017] NZHC 1444
UNDER the Land Transfer Act 1952 IN THE MATTER
of an application for an order that caveat
10697986.1 not lapseBETWEEN
T K HUANG Applicant
AND
DAWSON BUILDERS LIMITED Respondent
Hearing: 21 June 2017 Appearances:
R Reeve for Applicant
A J Logan for RespondentJudgment:
27 June 2017
JUDGMENT OF ASSOCIATE JUDGE OSBORNE [on application for order that caveat not lapse]
Introduction
[1] Thomas Huang asserts that he is the purchaser of a commercial property at Cromwell pursuant to an unconditional agreement to purchase the property from Dawson Builders Limited (DBL). Mr Huang caveated the title to protect his interest. DBL commenced the caveat lapsing procedure under s 145A Land Transfer Act 1952 (the Act).
[2] Mr Huang now applies for an order that his caveat not lapse.
HUANG v DAWSON BUILDERS LIMITED [2017] NZHC 1444 [27 June 2017]
The agreement
[3] The agreement, dated 16 January 2017, is on the standard REINZ/ADLS
form.1
[4] By the agreement DBL agrees to sell to Mr Huang the property for $525,000. The agreement incorporates all the general terms of sale.
[5] The agreement contains, as a further term of sale (“clause 19”), a condition in the following terms:
19.0 Lawyers Approval as to Title.
This agreement is conditional on Building Covenance (sic) for building accommodation satisfaction for 15 working day (sic) from signing Date.
Settlement on 14th April 2017.
[6] There is a definition of “working day” in clause 1.1(32) of the agreement,
which provides:
“Working day” means any day of the week other than:
(a) Saturday, Sunday, Waitangi Day, Good Friday, Easter Monday, Anzac Day, the Sovereign’s Birthday, and Labour Day;
(b) If Waitangi Day or Anzac Day falls on a Saturday or Sunday, the following Monday;
(c) A day in the period commencing on the 24th day of December in any year and ending 5th day of January (or in the case of sub-clause
10.2(2) the 15th day of January) in the following year, both days
inclusive;
(d) The day observed as the anniversary of any province in which the property is situated.
A working day shall be deemed to commence at 9.00 am and to terminate at
5.00 pm.
[7] As the provincial holiday in Otago is observed on 20 March, it did not constitute a “working day” and fell to be excluded from the calculation of “working
days” under this agreement. The provincial holiday in Auckland (observed on the
1 Form approved by the Real Estate Institute of NZ Incorporated and Auckland District Law
Society Incorporated, 9th ed, 2012 (5).
Monday nearest to 29 January) is irrelevant as the property is not situated there. On the other hand, Waitangi Day (6 February) fell within the 15 working day period from 16 January 2017. On application of the agreement’s definition of “working day”, the final date for confirmation of satisfaction of the clause 19 conditions was 7
February 2017.
[8] Clause 10.8 of the agreement deals with the operation of conditions, providing:
If this agreement is expressed to be subject either to the above or to any other condition(s), then in relation to each such condition the following shall apply unless otherwise expressly provided:
(1) The condition shall be a condition subsequent.
(2) The party or parties for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.
(3) Time for fulfilment of any condition and any extended time for fulfilment to a fixed date shall be of the essence.
(4) The condition shall be deemed to be not fulfilled until notice of fulfilment has been served by one party on the other party.
(5) If the condition is not fulfilled by the date for fulfilment, either party may at any time before the condition is fulfilled or waived avoid this agreement by giving notice to the other. Upon avoidance of this agreement, the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser under this agreement and neither party shall have any right or claim against the other arising from this agreement or its termination.
(6) At any time before this agreement is avoided, the purchaser may waive any finance condition and either party may waive any other condition which is for the sole benefit of that party. Any waiver shall be by notice.2
Factual background
Legal representation
[9] Mr Huang had Auckland solicitors, MBC Law Limited and in particular
Lilian Yao (a legal assistant), acting for him on the agreement.
2 Under clause 1.3(1) of the agreement all notices must be served in writing.
[10] Jeremy Callander of the Cromwell law firm, Checketts McKay Law Limited, acted for DBL.
Interaction before 7 February 2017
[11] On receipt of the agreement, Ms Yao immediately calculated the due date for satisfaction of the conditions as 8 February 2017. Because of the agreement’s provisions, this was a miscalculation by one day.
[12] In the meantime, Mr Huang discussed the title to the property with Ms Yao. He was satisfied with it. He agreed with her that he would continue with the purchase subject to his investigation of building covenants affecting the property.
[13] Over the next week, Mr Huang obtained information as to building restrictions from DBL’s real estate agent (the agent) and from the Central Otago District Council.
[14] Mr Huang deposes that around Thursday, 2 February 2017 he received a voice message from the agent asking about the agreement and whether it was unconditional. Mr Huang sent the agent a text on Friday, 3 February 2017 stating:
yes everything is good, no worries
to which the agent replied by text:
Great
[15] Mr Huang deposes that he had a telephone discussion with the agent later in the day in which he advised the agent that the conditions had been satisfied and that the agreement was unconditional.
[16] Subsequently, with reference to the Friday text, the agent was on Wednesday,
8 February 2017 (2.37 pm) to send an email to Ms Yao stating:
Afternoon Lilian, I told [DBL] that Thomas [Huang] texted me on Friday night [3 February 2017] the deal was all go, And Thomas rang yesterday and he said that it was going unconditional today…
[17] Mr Huang deposes that in his discussion with the agent on Friday, 3 February
2017, the agent had stated that he would advise DBL that conditions of the
agreement had been satisfied. Mr Huang refers to the agent’s subsequent 8 February
2017 email (above [16]) as “verifying” his evidence of the conversation. In fact, whereas Mr Huang’s evidence is that he advised the agent in the Friday discussion that “the agreement is unconditional”, the email sent by the agent to Ms Yao on Wednesday, 8 February 2017 records that Mr Huang had rung [him] the previous day (that is, Tuesday, 7 February 2017) and said the agreement was going unconditional on 8 February 2017.
Interaction on 7 February 2017
[18] The parties engaged in discussion and correspondence on 7 February 2017. The sequence is initially difficult to follow as, in their affidavits first filed in support of the application, neither Mr Huang nor Ms Yao referred to the first events which occurred on 7 February 2017.
[19] Significantly, Ms Yao’s initial affidavit in support of this application referred
to the exchanges between solicitors on 7 February 2017 in two paragraphs:
Cancellation of the Agreement
8.I sent the respondent’s solicitor a courtesy email on 7 February 2017 advising that the conditions were due the following day and that I would seek my client’s instructions with regard to the satisfaction of the condition. A copy of the email is annexed hereto …
9. Shortly after I sent the email I received a call from Mr Callander, the
respondent’s solicitor, asking why the condition was due on 8
February 2017. I advised him that it was due then because there had been two public holidays, Auckland Anniversary and Waitangi Day.
The respondent’s solicitor replied “ok” and I understood that we had
agreed the conditions would be due the following day being 8
February 2017.
[20] Mr Huang returned to the 7 February 2017 discussions in the concluding paragraph of her affidavit in which she recorded:
The respondent’s solicitor did not indicate that the conditions were due to be satisfied on 7 February 2017 at any time during our conversation that day and if he did, I would have made every effort to contact Mr Huang and confirm that the agreement was unconditional.
[21] Mr Callander’s evidence indicates that Ms Yao’s initial evidence as to exchanges on 7 February 2017 was incomplete.
[22] Mr Callander deposed under a heading “7 February 2017”:
7 February 2017
5. Up until 7 February 2017, the final day for confirmation of clause
19, I had no communications with the lawyers for the Applicant. At
11:30am on 7 February 2017, both myself and Lilian Yao of MBC Lawyers received emails from Renee Raymond of Bayleys Locations reminding us that confirmation was due that day – copies of those emails are attached …
6.At 3:10pm on 7 February 2017 I called MBC Law and eventually spoke to LILIAN YAO. I advised Ms Yao that confirmation of the Agreement was due that day and enquired as to how things were progressing in that respect. Ms Yao advised me that she had thus far received no instructions from the Applicant. I advised Ms Yao that the Applicant had until 5:00pm that day to confirm the Agreement unconditional.
7.At 3:35pm I received an email from Ms Yao (annexure “A” of her affidavit) in which she advised that MBC Law calculated the confirmation date for Clause 19.0 to be 8 February 2017.
8. In Paragraph 8 of her affidavit, Ms Yao says that her email sent at
3:35pm was a “courtesy email”. I am not sure what she means by that but if she is suggesting that that (sic) her email was the first exchange we had that day then that is incorrect. Her email was a direct response to our earlier telephone conversation of 3:10pm.
The Telephone Conversation of 3:37pm 7 February 2017
9.At approximately 3:37pm on 7 February 2017 I called MBC Law and spoke to Ms Yao. I asked Ms Yao to explain her reasons for calculating the confirmation date to be 8 February 2017. Ms Yao explained that Waitangi Day (6 February 2017) and Auckland Anniversary Day (30 January 2017) had to be taken into account and were not ‘Working Days’. I acknowledged that I had counted Auckland Anniversary Day as a ‘Working Day’. I may well have said “OK” in response to that explanation.
10.In Paragraph 9 of her affidavit, Ms Yao says that because I said “OK” to her explanation for 8 February 2017 being the due date for fulfilment of the conditions, this caused her to think that we had reached agreement between us that 8 February 2017 was the date for fulfilment of the conditions. There was no such agreement between us, express or implied. My recall of the conversation is set out above in paragraph 10. My response to Ms Yao’s explanation for the date for fulfilment being 8 February was simply an acknowledgement she had given me an explanation.
11. There was no discussion or agreement that if Ms Yao was wrong in her calculations that nevertheless 8 February 2017 was the final day for confirmation. In other words there was no suggestion that I was giving Ms Yao an extension of time if she was wrong. I did not correct Ms Yao when she gave her explanation because I did not know at the time she was speaking to me that she was wrong and regrettably I did not until the next day check the Agreement and ring her back to point out to her that her calculation was incorrect. During the conversation Ms Yao did not ask me to check her calculation and confirm she was correct. She told me as a fact that her client did not have to confirm the Agreement until the next day and she gave me the reason for her calculation. The telephone call did not go beyond that and lasted 1.8 minutes.
12.Subsequent emails sent by Ms Yao and Mr MacDonald of MBC Law after I had brought the Agreement to an end on 8 February 2017 make no reference to an agreement being reached by us as a result of that telephone conversation.
[23] The emails to which Mr Callander referred in his affidavit were:
(a) Emails from the agent to Mr Callander and to Ms Yao at 11.30 am, 7
February 2017, attaching a form for signature as to the agreement being unconditional and stating:
Our records indicate this contract is conditional until today. Please arrange for the attached to be signed and returned to us at your soonest convenience.
(b)Emails of 8 February 2017 from Ms Yao’s firm setting out Mr Huang’s response to DBL’s notice of cancellation – I consider this correspondence below from [30]).
[24] Ms Yao provided a reply affidavit. She responded to the paragraphs in Mr
Callander’s affidavit which I have quoted:
Paragraph 5
3.I received the email from Renee Raymond but because I had diarized the conditions of the agreement to be due on 8 February 2017, I dismissed the email and assumed that she had miscalculated the due date of the conditions.
Paragraph 6, 7 and 8
4.I agree with paragraph 6 of Mr Callander’s affidavit and add that following our conversation I recalculated the conditional date and again concluded that the conditions were due to be confirmed on 8
February 2017. As such, I emailed Mr Callander to confirm that the conditions were due to be satisfied the following day on 8 February
2017 (see annexure A to my affidavit sworn 27 February 2017).
Paragraph 9, 10 and 11
5.I agree with paragraph 9 of Mr Callander’s affidavit and add that the conversation did not go on any further and I did not ask for him to check my calculation because I genuinely believed that based on my explanation and his response we had come to the agreement that the conditions would be due the following day.
Paragraph 12
6.The emails referred to in paragraph 12 of Mr Callander’s affidavit were sent after Mr Huang instructed our office that he confirmed the conditions of the agreement with the Respondent’s Real Estate Agent on both 3 and 7 February 2017. As such, while I had an agreement with Mr Callander to confirm the conditions on 8 February 2017, satisfaction of the conditions of the agreement had already been confirmed.
[25] In summary, the material communications of 7 February 2017 which are established through the affidavit evidence as a whole are as follows:
· At 11.30 am – the agent emails both solicitors as to the contract being
conditional “until today”.
·3.10 pm – Mr Callander telephones Ms Yao and in the conversation: (i) Mr Callander states that confirmation is due that day;
(ii)Mr Callander enquires as to progress in relation to confirmation;
(iii) Ms Yao states that so far she has received no instructions from
Mr Huang;
(iv) Mr Callander tells Ms Yao that Mr Huang has until 5.00 pm
(that day) to confirm the agreement is unconditional.
· 3.35 pm – Ms Yao emails Mr Callander and states that she calculates that the condition in clause 19 is due for confirmation on 8 February;
· 3.37 pm – Mr Callander telephones Ms Yao and in the conversation:
(i) Mr Callander asks for Ms Yao’s explanation of her calculation;
(ii)Ms Yao explains that both Waitangi Day and Auckland Anniversary Day were to be taken into account as they are not “working days”;
(iii)Mr Callander accepts that he may well have said “okay” in response to Ms Yao’s explanation;
(iv) Mr Callander acknowledged to Ms Yao that he had counted
Auckland Anniversary Day as a “working day”.
· 5.00 pm – the 7 February “working day” expires without further exchange between the solicitors.
Interaction on 8 February 2017
[26] Mr Callander checked the definition of “working days” in the agreement and satisfied himself that Ms Yao was incorrect as excluding in her calculations Auckland Anniversary Day as a “working day”. Mr Callander deposes that he performed this check on the morning of 8 February 2017.
[27] Then, around 10.00 am, Mr Callander attempted to telephone Ms Yao but had to speak to her receptionist. He left a message which the receptionist recorded as:
… expected confirmation yesterday. Auckland Anniversary doesn’t apply in the agreement. Client time ran out yesterday. Have a backup offer. Their position is that your client missed the boat …
[28] At 11.40 am, Mr Callander sent an email to Ms Yao confirming that the agreement was now at an end, Mr Huang having failed to confirm on time.
[29] Ms Yao then took instructions from Mr Huang at 12.40 pm. From the evidence given by both Ms Yao and Mr Huang, they do not appear to have discussed the miscalculation of time. Rather, Mr Huang explained to Ms Yao that he had
confirmed to the agent “several days ago” that the condition had been satisfied and
that the agreement was unconditional.
[30] Ms Yao then emailed Mr Callander. She stated:
Our client advises that he has confirmed to real estate agent of Bayleys several days ago that the condition has been satisfied. Therefore the above agreement is unconditional. Your client has not (sic) right to terminate the
…agreement.
[31] Apparently around the same time, Ms Yao contacted the agent. The agent promptly sent the email to Ms Yao to which I have referred at [16] above, and in which the agent recorded:
I told [DBL] that Thomas [Huang] texted me on Friday night, [3 February
2017] the deal was all go, And Thomas rang yesterday and he said it was
going unconditional today…
[32] Ms Yao then sent a further email to Mr Callander attaching the agent’s email.
She referred to the content of the agent’s email and added:
Since our client calculated Auckland Anniversary day as public holiday, our client advised real estate agent that he would confirm unconditional through lawyers today.
Ms Yao also recorded that her firm had received the deposit into their trust account and that Mr Huang might lodge a caveat to protect his interest.
[33] Mr Callander promptly replied to Ms Yao by email reiterating DBL’s position that confirmation had not occurred in time. He rejected Ms Yao’s suggestion that Mr Huang might have a caveatable interest.
[34] At that point, a partner of Ms Yao’s firm (Ronald (John) Macdonald) took up the correspondence and emailed Mr Callander. He stated:
It appears that our client gave written notice the contract was unconditional by text to the agent on Friday and confirmed that again on Monday
Monday was a public holiday in Auckland and your client and the agent were aware of this – our client mentioned that. Accordingly your client received the information that the contract was unconditional and because Monday was a public holiday that written confirmation from us would be
forthcoming today. In our view your client cannot claim the contract is at an end.
For the record we confirm the conditions in the contract are satisfied as previously advised and look forward to receiving your settlement statement and e-dealing particulars.
[35] At 4.22 pm, 8 February 2017, Mr Macdonald on behalf of Mr Huang caveated the title to the property. The estate or interest claimed was:
Pursuant to an Agreement for Sale and purchase dated 16 January 2017 between the registered proprietor as vendor and the caveator as purchaser.
DBL’s backup contract
[36] In addition to its agreement with Mr Huang, DBL had a backup contract with another purchaser of the property. It was entered into nine days after Mr Huang’s agreement and was for the same purchase price ($525,000). The evidence does not disclose whether Mr Huang or his representatives had been informed of the existence of the backup contract before 8 February 2017.3 The backup contract (also on the
standards REINZ/ADLS form)4 provided as Further Terms of Agreement that:
This agreement is conditional upon the existing agreement for the sale of [the property] not being confirmed in all respects by 7th of February 2017 being the latest date on which a condition under that agreement is to be confirmed. The Vendor agrees not to grant any extension of the latest extension date nor to waive any right of cancellation or termination under that contract.
[37] Accordingly, DBL, as a matter of its contractual obligation to the backup purchaser, was not permitted to agree to an extension of time for confirmation of the Huang agreement.
[38] Once Mr Callander gave notice of cancellation of the [Huang] agreement on
8 February 2017, DBL confirmed to the backup purchaser that the backup contract had become unconditional.
3 The backup contract was expressly referred to in the message which Mr Callander left with Ms
Yao’s receptionist around 10.00 am, 8 February 2017, above at [27].
4 See above n 1.
The grounds of application
[39] Mr Huang’s application here asserted an interest in the property pursuant to the agreement. The application did not refer to confirmation of the clause 19 conditions.
[40] The synopsis of submissions provided for Mr Huang identified three grounds on which it was asserted the Court should recognise that Mr Huang has a caveatable interest:
(a) The agreement became unconditional when Mr Huang gave confirmation of satisfaction of the conditions to DBL’s agent on 3
February 2017;
(b)The agreement became unconditional when Mr Huang’s solicitors confirmed satisfaction of the conditions to DBL’s solicitors on 8
February 2017, the parties having agreed on 7 February 2017 (through their solicitors) to extend the time for confirmation to 8 February
2017;
(c) In equity, DBL is estopped from asserting that Mr Huang’s
confirmation on 8 February 2017 was too late.
[41] At the hearing, Mr Reeve (who was not the author of the synopsis of submissions for the applicant) withdrew reliance upon the first and second grounds ([40](a) – (b) above). The concession that those grounds could not be maintained was proper. The first ground – relying on communication with the agent – did not meet the requirements of notice under the agreement. The generality of Mr Huang’s statements in his exchanges with the agent also lacked specificity. The second ground – confirmation following an agreed extension of time on 7 February 2017 – was unsupported by evidence of a request for extension or agreement to extension. Such discussion as occurred on 7 February 2017 was confined to the question of the correct calculation of working days. Any variation of the nature alleged was also
problematic because, as an oral variation, it would have been unenforceable for non- compliance with s 24 Property Law Act 2007.5
[42] Accordingly, the single ground for the Court’s determination as pursued for the applicant is that based on estoppel. Mr Huang’s reliance on that ground is to be tested under the principles relating to the Court’s consideration of the caveats.
Application that caveat not lapse – the principles
[43] I adopt these principles in relation to Mr Huang’s application:6
(a) The burden of establishing that the applicant has a reasonably arguable case for the interest claimed is upon the caveator;7
(b)The caveator must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission, or of any trust expressed or implied;8
(c) The summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact9
– an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no
longer does so;10
5 See Thomas Gault (ed), Gault on Commercial Law (online looseleaf ed, Thomson Reuters) at
[PL 24.03].
6 Cube Building Solutions Limited v Kingloch Holdings Limited HC Christchurch CIV-2009-409-
935, 15 October 2010 at [13].
7 New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA) at 43;
Coltart v Lepionka & Company Investments Ltd [2016] NZCA 102, [2016] 3 NZLR 36 at [30], citing National Bank of New Zealand v Radisich HC Hamilton CIV-2003-419-928, 25 August
2003 at [6].
8 Land Transfer Act 1952, s 137.
9 New Zealand Limousin Cattle Breeders Society Inc v Robertson, above n 7, at 43.
10 Sims v Lowe [1988] 1 NZLR 656 (CA) at 659-660.
(d)When an applicant has discharged the burden upon the applicant, there remains a discretion as to whether to remove the caveat, which will be exercised cautiously;11
(e) The Court has jurisdiction to impose conditions when making orders.12
The estoppel ground
[44] Mr Huang’s estoppel ground was identified in the synopsis of submissions in
this way:
In the event that the Respondent’s solicitor did not authorise an extension [of the time for confirmation] then he had a duty to correct the misunderstanding.
[45] Once it is accepted that there was no agreement reached on 7 February 2017 to extend the date for confirmation (as appropriately conceded by Mr Reeve), focus of the argument for Mr Huang was on the proposition that DBL, through Mr Callander, had a duty to speak to correct a misunderstanding arising from the communications between the parties. Counsel referred in particular to two authorities containing statements as to the law in this area which bind this Court. Primarily counsel adopted passages from the judgment of the Court of Appeal (reasons given by Cooper J) in Official Assignee v Kingston Developments Group
Ltd.13 Secondly, reference was made to Purewal BS & JK Ltd v Connell Street Ltd.14
Also of guidance on the law as to estoppel by silence is the commentary of Dr James
Every-Palmer in Dr Butler’s text, Equity & Trusts in New Zealand (the commentary).15
11 Stewart v Kaipara Consultants Ltd [2000] 3 NZLR 55 (CA); Pacific Homes Ltd v Consolidated
Joineries Ltd [1996] 2 NZLR 652 (CA).
12 Raiser Developments Ltd v Trefoil Properties Ltd [2008] NZCA 73, (2008) 9 NZCPR 161.
13 Official Assignee v Kingston Developments Group Ltd [2016] NZCA 415, (2016) 17 NZCPR
531, (2016) 7 NZConvC 96-015.
14 Purewal BS & JK Ltd v Connell Street Ltd [2012] NZCA 42, (2012) 13 NZCPR 108.
15 James Every-Palmer “Equitable Estoppel” in Andrew S Butler (ed) Equity and Trusts in New
Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 601.
[46] In both Purewal and Kingston Developments, the Court of Appeal has adopted Dr Every-Palmer’s summary of the principles of estoppel by silence stated in this way:16
The equitable doctrine of estoppel by acquiescence (which was a strand of proprietary estoppel), traditionally protected a party who relied on a belief or expectation fostered by the silence of another party in circumstances rendering it unconscionable for the silent party to resile from the belief or expectation. This principle now identifies one of the kinds of conduct which may give rise to a cause of action based on the doctrine of modern equitable estoppel.
[47] In Purewal, the Court of Appeal also referred with approval to the next passage in Dr Every-Palmer’s commentary, in which it is stated:17
In general the law is reluctant to impose liability on a party who simply remains silent and allows another party to act to his or her detriment. However, in certain circumstances silence may give rise to an estoppel either by amounting to a genuine representation, or because the silent party was under a duty to speak.
(footnotes omitted).
[48] As further observed in the commentary, New Zealand courts in a number of cases have analysed allegations of estoppel by silence by asking whether the silent party was under a legal, as opposed to a mere moral or social duty, to speak.18 Gold
Star Insurance Co Ltd v Gaunt is an example.19
[49] The Court, in its overall assessment of whether there has been unconscionable conduct, is not bound by strict criteria.20 A party claiming the
16 Every-Palmer, above n 15, at [19.5.1]; adopted in Purewal BS & JK Ltd v Connell Street Ltd, above n 14, at [60] and Official Assignee v Kingston Developments Group Ltd, above n 13, at [116].
17 Every-Palmer, above n 15, at [19.5.2]; Purewal BS & JK Ltd v Connell Street Ltd, above n 14, at
[61].
18 Every-Palmer, above n 15, at [19.5.3].
19 Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 (CA) at 87; Morton-Jones v R B & J R Knight Ltd [1992] 3 NZLR 582 (HC) at 588, both Courts citing Spencer Bower & Turner on Estoppel by Representation (3rd ed, Butterworths, London, 1977) at [55], for the statement –
“The main condition subject to which alone silence or inaction counts as a representation is that
a legal (not a mere moral or social) duty shall have been owed by the representor to the representee to make the disclosure, or to take the steps, the omission of which is relied upon as creating the estoppel. For the current edition, see Spencer Bower & Turner Estoppel by Representation (4th ed, LexisNexis UK, London, 2004).
20 Gold Star Insurance Co Ltd v Gaunt, above n 19, at 86.
benefit of an equitable estoppel will nevertheless have to establish some essential elements. They are conveniently summarised in the commentary as:21
(a) A belief or expectation has been created or encouraged through some action, representation, or omission to act by the party against whom the estoppel is alleged;
(b) The belief or expectation has been reasonably relied on by the party alleging the estoppel;
(c) Detriment will be suffered if the belief or expectation is departed from; and
(d) It would be unconscionable for the party against whom the estoppel is alleged to depart from the belief or expectation.
[50] Where reliance is placed upon a representation, there will often be a requirement that the representation be “clear and unequivocal”.22 The more appropriate test may be to ask whether the representation is sufficiently unequivocal to justify the other party’s reliance on it.23
[51] I adopt, in this context, the conclusion of Lord Walker in Thorner v Majors where his Lordship observed that the relevant assurance must be “clear enough” to justify the reliance and that what amounts to sufficient clarity “is hugely dependent on context”.24
[52] I also adopt the observation of Dr Every-Palmer that:25
An estoppel is … unlikely to arise to vary the contractual rights and obligations between well-resourced commercial parties on the basis of informal communications of an ambiguous kind, or mere “comforting sounds”.
(footnotes omitted).
[53] The cases cited in the commentary in support of that observation include the decision of the Court of Appeal in Gawn v MacDonald.26 In that case, the Court
upheld the trial Judge’s conclusion that a solicitor’s letter relied upon by the other
21 Every-Palmer, above n 15, at [19.2].
22 See, for instance, The Ship “Betty Ott” v General Bills Ltd [1992] 1 NZLR 655 (CA) at 671.
23 See Lim v Ward McCulloch Solicitors Nominees Ltd (1999) 8 NZCLC 261,922 (CA) at [26].
24 Thorner v Majors (2009) 1 WLR 776 at [56].
25 Every-Palmer, above n 15, at [19.1.1].
26 Gawn v MacDonald (1992) 2 NZ ConvC 191,071 (CA) at 191,077 – 191,078.
party as varying the contractual requirements had been equivocal and did not give rise to an estoppel. McKay J, delivering the judgment of the Court of Appeal, observed:27
…at no time did Mr Hammond press Mr Fidler for an unequivocal answer
on this issue.
[54] Closely related to the requirement that the conduct relied upon be sufficiently unequivocal is the requirement that the other party’s reliance is reasonable. That concept, as Dr Every-Palmer observes, has three aspects:28
(a) the belief or expectation must have been reasonably held;
(b)it must have been reasonable for the representee to have relied on the belief or expectation; and
(c) ongoing reliance must also have been reasonable.
These matters are to be assessed objectively by the standard of the reasonable person in the position of the representee. As Eichelbaum CJ observed in Travel Agents Assn of NZ Inc v NCR (NZ) Ltd (1991):29
Any finding of unconscionability must be grounded upon an interpretation which the reasonable person would have drawn from that letter, together with the defendant’s resiling from that position.
[55] Dr Every-Palmer identifies four particular factors which may inform the
Court’s decision as to the existence of a duty to speak, being:
(a) The parties’ relationship: the writer observes (as adopted by the Court of Appeal in Purewal) that:30
Duties to speak will be rare between commercial parties
dealing at arm’s length. ...
27 Gawn v MacDonald, above n 26, at 191,079.
28 Every-Palmer, above n 15, at [19.2.2].
29 The Travel Agents Association of NZ Inc v NCR (NZ) Ltd HC Wellington CP 1069/90, 27 March
1991 at 9 – 10.
30 Every-Palmer, above n 15, at [19.5.4(1)]; Purewal BS & JK Ltd v Connell Street Ltd, above n 14, at [65].
However, a number of relationship-based factors may support the existence of a duty to speak. ... Secondly, communications between the parties may give rise to a duty to speak and correct a misunderstanding, for example as to the necessity of exercising a formal option to renew a lease, the effect of a contract about to be entered into or the identity of a party in a legal action. Thirdly, the silent party may have been aware that the other party was acting in reliance on a mistaken assumption as to his or her rights over property owned by the silent party...
(b)Silent party’s knowledge of other party’s mistaken belief: Dr Every- Palmer observes (by reference to authority) that, before a duty to speak may arise, the silent party must have actual knowledge, constructive knowledge, or at least the suspicion that the other party is
relying on a false assumption.31
(c) Conflicting duties: the writer observes that a duty to speak may be precluded if the silent party owes a conflicting obligation to another party.32 Reference is made to the decision of the New South Wales Court of Appeal in The “Zhi Jiang Kou”.33 Kirby P there rejected an argument that a solicitor had a duty to warn the other solicitor of an approaching time bar, stating:34
To find a duty in conscience in such circumstances would be to revolutionise the relationships which exist day by day in countless lawyers’ offices. Conscience does not run so far. Many have been the cases where solicitors for one party have known of an approaching time bar, known that their opponent has forgotten or overlooked it, and yet remained silent out of duty to their own clients. Professional comity in such circumstances ordinarily takes second place to professional duty.
(d)Ability of mistaken party to correct own error: the writer recognises that:35
31 Every-Palmer, above n 15, at [19.5.4(2)].
32 Every-Palmer, above n 15, at [19.5.4(3)].
33 The “Zhi Jiang Kou” [1991] 1 Lloyd’s LR 493 (NSWCA), also reported sub nom. China Ocean Shipping Co Ltd v PSC Chellaram (1990) 28 NSWLR 354 (an appeal to the High Court was dismissed; see footnote at 354).
34 The “Zhi Jiang Kou, above n 33, at 514; 385 – 386.
35 Every-Palmer, above n 15, at [19.5.4(4)].
The mistaken party’s ability to discover the true situation is a relevant factor in determining whether a reasonable person would expect the silent party to speak out.
(footnote omitted) …
and (as adopted by the Court of Appeal in Purewal BS & JK Ltd v
Connell Street Ltd):36
…a duty to speak is strongly indicated where the means of discovering the true situation is solely in the domain of the silent party, where the silent party is aware that the mistaken party’s primary avenue of enquiry will be futile, or where the silent party is deliberately concealing the true situation.
(footnotes omitted).
Analysis of the parties’ conduct
7 February 2017 – before 3.37 pm
[56] In order to establish an arguable estoppel, Mr Reeve for Mr Huang points to the 3.37 pm telephone conversation on 7 February 2017.
[57] Before 7 February 2017, there had been nothing in the conduct of the parties or their solicitors which could have alerted DBL or Mr Callander to the mistaken view which Ms Yao had as to the final date for confirmation. DBL and its representatives did not know of, let alone contribute to, Ms Yao’s miscalculation.
[58] Even as the final date for confirmation arrived, it was not the duty of Mr Callander (or his client) to alert Ms Yao to the significance of 7 February 2017. Mr Callander’s duty in such circumstances was to his client.37
[59] The communications to Ms Yao from the agent (11.30 am) and Mr Callander
(3.10 pm) clearly identified the belief of both the agent and Mr Callander that 7
February 2017 was the final day for confirmation. At that point, with access to the
agreement, it was entirely within Ms Yao’s ability (and duty to her client) to establish
the correct calculation.
36 Every-Palmer, above n 15, at [19.5.4(4)]; Purewal BS & JK Ltd v Connell Street Ltd, above n 14, at [66]; see also Kingston Developments, above n 13, at [119].
37 See The “Zhi Jiang Kou”, above n 33, at 514,385.
[60] Ms Yao’s apparent failure to take any further step before mid-afternoon is unexplained, save possibly through the explanation which she was to give to Mr Callander in their telephone conversation at 3.10 pm, namely that she had thus far received no instructions as to how things were progressing from Mr Huang.
[61] As it was, Ms Yao was presented with a yet further opportunity to get her calculation correct when Mr Callander reached her at 3.10 pm to advise that the time for confirmation would expire at 5.00 pm.
[62] It was only then that Ms Yao took any specific step that day. Ms Yao does not depose to having carried out any checking of the agreement after the 3.10 pm discussion. But what she did was send, 25 minutes later, the 3.30 pm email which she has described as the “courtesy email” stating (without explanation) that her calculation was that condition 19.0 was due on 8 February 2017.
[63] Within two minutes of receiving that email, Mr Callander was on the phone to Ms Yao asking for her explanation of her calculation. When Ms Yao explained that she had excluded as “working days” both Waitangi Day and Auckland Anniversary Day, it is Mr Callander’s evidence that he may well have said “okay” in response to that explanation as Ms Yao deposes. However, it is also Mr Callander’s undisputed evidence that he indicated to Ms Yao that for his part, he had counted Auckland Anniversary Day as a “working day”.
[64] At that point, with more than an hour left for confirmation under the correct calculation, the issue of calculation was fairly and squarely before the lawyers. It was the agent and Mr Callander who correctly stated the calculation that day and Ms Yao who remained incorrect in her calculation.
The 3.37 pm telephone conversation
[65] It cannot be suggested that Mr Callander (or his client) had any pre-existing duty in conscience to alert Ms Yao to the calculation issue in an any more detailed or direct way than he did. The misunderstanding as to the correct date for confirmation was entirely that of Ms Yao and/or her client, not Mr Callander and/or his client. As a result of the 3.37 pm discussion, Ms Yao was alerted to the fact that Mr Callander
(and clearly also the agent) had counted Auckland Anniversary Day as a “working day” in their calculation. Given the straightforward regime for calculation of the period for confirmation, the checking of calculations against the wording of the agreement was a matter which would require minutes at the most.
[66] Mr Huang’s assertion of estoppel therefore falls at the first hurdle in that he cannot point to an arguable duty on the part of Mr Callander to speak beyond the matters he raised.
[67] For similar reasons, Mr Huang’s assertion of an estoppel must also fail by reason of the fact that Ms Yao (if relying on Mr Callander’s conduct) was attaching weight to what was at most an equivocal response to her explanation of her calculation. In the exchange related by Mr Callander, which Ms Yao does not dispute, nothing said or omitted by Mr Callander could be said to have created an understanding which was sufficiently unequivocal to be treated as an implicit representation. In this case, as in Gawn v Macdonald, it is significant that Ms Yao did not press Mr Callander for an unequivocal statement as to his acceptance or otherwise of her calculation.
A sufficiently unequivocal representation or understanding?
[68] Once Mr Reeve withdrew as one of the grounds of opposition the assertion (derived from the evidence of both Ms Yao and Mr Huang) that Mr Callander’s uttering of the word “okay” constituted (DBL’s) agreement that the time for confirmation was extended to 8 February 2017, the single focus of Mr Reeve’s submissions turned to the elements of an estoppel.
[69] First, Mr Reeve submitted that although Mr Callander’s “okay” was insufficient to give rise arguably to an agreement to vary the contract, the exchange between Ms Yao and Mr Callander, incorporating as it did that response from Mr Callander, was sufficient to impose upon Mr Huang and Mr Callander a duty to speak. In particular, a duty to clarify that Mr Callander did not necessarily agree with Ms Yao’s calculation.
[70] Mr Reeve drew support from passages in the judgment of the Court of Appeal in Kingston Developments. In that case, which turned on whether a purchaser was required to tender settlement, the Court found that through a pattern of prior conduct, the vendor had indicated by words or conduct that a contractually proper tender by the purchaser would be futile. The Court concluded that the vendor’s solicitor had effectively endorsed, by his silence, the understanding of the purchaser’s solicitor
that settlement could not occur that day.38
[71] The facts of Kingston Developments make it a very different case to the present. In Kingston Developments, the understanding of the purchaser’s solicitor had emanated from the vendor’s solicitor’s own statements. Reliable information as to the vendor’s ability to settle could only be obtained from the vendor. As the final hour for settlement arrived, it remained only the vendor who could clarify whether the position had changed. A duty to speak was clearly established. As the Court of Appeal found, Kingston (through its solicitors) by its silence gave an unambiguous
indication that it was not in a position to settle.39
[72] Mr Reeve sought to place great weight upon Mr Callander’s use of the word “okay”. He referred me to a dictionary definition of “O.K.” which identifies the expression as an informal interjection meaning “an expression of approval or agreement”.40
[73] Mr Reeve’s submission seeks to ascribe to Mr Callander’s “okay” the status of a definitive response which it cannot bear in the context of the conversation as a whole. Ms Yao was explaining for the first time (approximately one-and-a-half hours before the time for confirmation was to run out) her construction of the contract. Mr Reeve accepted that Ms Yao did not request that DBL agree to an extension. Equally, Ms Yao did not request that Mr Callander expressly confirm or reject her calculation. To the contrary, Mr Callander explained his (correct) view
namely that Auckland Anniversary Day fell to be treated as a “working day”.
38 Official Assignee v Kingston Developments Group Ltd, above n 13, at [120].
39 Official Assignee v Kingston Developments Group Ltd, above n 13, at [128].
40 Collins English Dictionary, Essential (1st ed, 2003, HarperCollins Publishers).
[74] I conclude that, to the extent Mr Huang (through Ms Yao) may have relied upon an understanding or implicit representation created through the 7 February communications, the asserted “assurance” was not clear enough.41
Reasonable reliance?
[75] For similar reasons, Mr Huang’s assertion of an estoppel cannot succeed in that he has not established that it is arguable that it was reasonable on Ms Yao’s part to rely upon her 3.37 pm discussion with Mr Callander as constituting an acceptance that her calculation of time was correct. The agreement itself defined the days which were to be taken into account. Ms Yao’s apparent decision to take a particular construction of the telephone conference rather than to revisit the agreement and to construe its terms was beyond argument unreasonable.
Conclusion
[76] In these circumstances, Mr Huang has not established that he has a reasonably arguable case, based on an estoppel, for the interest he claims as caveator by way of an agreement for sale and purchase which remains on foot.
[77] Each case in which an estoppel is pleaded must turn on its own facts, and ultimately on whether there is (in the present context arguably) a set of circumstances which require the Court to impose a duty in conscience. There exists, however, a sufficient cross-over between factors present in this case and those in the New South Wales case in The “Zhi Jiang Kou” to make appropriate further reference to the judgment of Kirby P in that case. His Honour’s decision included the following passage which explained why one of the solicitors involved in the subject transaction did not have a duty in conscience to alert the other to an imminent time-
limit”.42
No duty to warn the opponent of an approaching time bar:
But can it be said that a duty to break the silence arose in the circumstances out of the knowledge on the part of Mr James that Mr Whitehead was labouring under an assumption which he deliberately refrained from correcting when it was his duty in conscience to do so? See Thompson v
41 See Thorner v Majors, above n 24, at [56].
42 The “Zhi Jiang Kou”, above n 33, at 514;385 – 386.
Palmer (1933) 49 CLR 507 at 547; Foran v Wight (1989) 168 CLR 385 at
411 and Deane J, Commonwealth v Verwayen (at 443-445). I think not. Mr
James owed a duty to his clients. His oral evidence was that he had no instructions to waive reliance upon any defence available to his clients including, therefore, a defence of the time bar. But did conscience, nonetheless, require, as Carruthers J concluded, that Mr James should have alerted his opponent’s solicitor about an advancing time bar? Ordinarily, there would be no such duty. Indeed, in some cases, to do so would be in breach of the duty to the solicitor's own client. All that can be said in this case is that the correspondence provided an additional ingredient. But it falls far short of activating a duty in conscience in Mr James to bring the opponent’s solicitor’s attention to something which it was that solicitor’s own business to notice and ensure that his client observed.
To find a duty in conscience in such circumstances would be to revolutionise the relationships which exist day by day in countless lawyers' offices. Conscience does not run so far. Many have been the cases where solicitors for one party have known of an approaching time bar, known that their opponent has forgotten or overlooked it, and yet remained silent out of duty to their own clients. Professional comity in such circumstances ordinarily takes second place to professional duty. If the currency of negotiations (and a stated assumption such as that in the letter of 29 April 1986) were held to give rise to a duty to warn an opponent’s solicitor of an approaching time bar, there would be much less negotiation; or it would be highly circumscribed. The most that the letter did was to contemplate a short delay within which to permit settlement negotiations. It did not relieve the respondent’s solicitors of their continuing duty to their client. Nor did it estop the opponent from relying on the time bar when it descended. The respondent must assert that the estoppel lasted until October when process was finally issued. I can see absolutely no warrant for that conclusion. It is not one to which my conscience leads me.
[78] The reasons for rejecting as not arguable the assertion of an estoppel in this case are no less compelling.
Other unsatisfactory aspects of evidence for Mr Huang
[79] By reason of the above conclusions, it is unnecessary that I consider in detail other aspects of the evidence which would have weakened Mr Huang’s case if found to be arguable. They include these:
(a) Whereas the application asserts that Mr Huang on 7 February 2017 relied on an understanding reached in the 3.47 pm (7 February 2017) telephone conversation, neither Ms Yao nor Mr Huang asserted such reliance in the important period following DBL’s cancellation of the agreement at 11.40 am, 8 February 2017;
(b) In the discussion between Ms Yao and Mr Huang at 12.40 pm, 8
February 2017, they identified as their position the proposition that Mr Huang had confirmed to the agent several days earlier that the condition had been satisfied, rendering the agreement unconditional (as shortly afterwards recorded in Ms Yao’s email to Mr Callander at
12.49 pm);
(c) Ms Yao, in her 2.53 pm email to Mr Callander, then provided the further explanation that Mr Huang had confirmed by phone to the agent on 7 February 2017 that the agreement was “unconditional” and that Mr Huang also advised the agent that he would be “confirming unconditional through lawyers today” because Mr Huang had calculated the Auckland Anniversary Day as a public holiday;
(d)Ms Yao’s colleague, Mr Macdonald, by his 3.51 pm email, essentially reiterated the allegation that the contract had become unconditional through a text to the agent on 3 February 2017 and oral confirmation to the agent on 6 February 2017, but with “written confirmation” only to become available from Mr Huang’s Auckland solicitors when the (Monday) public holiday in Auckland had passed.
[80] These various communications at the very time of cancellation speak not of the reliance (subsequently asserted) on something Mr Callander had omitted to say on 7 February 2017. Rather, they speak of the decision by Mr Huang and/or his lawyers to adopt an informal approach to “confirmation”, dealing only with “formal” confirmation when the time of the lawyers’ unavailability (on holiday) had passed.
[81] As matters stand, in terms of undisputed facts, Mr Huang’s assertions of estoppel must fail in any event. If questions of actual reliance on an understanding taken out of the 3.37 pm conversation had here needed further consideration, the content of the contemporary communications sent by Mr Huang’s lawyers, setting out their reasoning at the time, would have served to seriously undermine Ms Yao’s (and thereby Mr Huang’s) evidence as to actual reliance.
Outcome
[82] Mr Huang’s application for an order that his caveat not lapse will be
dismissed.
Costs
[83] Counsel both addressed me briefly in relation to costs and disbursements at the conclusion of their submissions. It was accepted that costs (together with disbursements) would follow the event on a 2B basis.43
Note on representation
[84] The solicitor for the applicant in this proceeding was Mr Macdonald of the firm which acted for Mr Huang on the subject transaction and who sent one of the emails on 8 February 2017 by which DBL’s cancellation was challenged. The applicant’s synopsis of submissions for this hearing was also in Mr Macdonald’s name.
[85] In the event, Mr Reeve was instructed as counsel to appear for the applicant at the hearing. In his independent approach (as exhibited in the concessions he appropriately made in the course of submissions), Mr Reeve responsibly fulfilled his duty to the Court.
[86] Until the morning of the hearing, the Court was not aware that Mr Macdonald after filing his synopsis had instructed other counsel to appear. But for the fact that the respondent was reasonably entitled to a prompt adjudication of the issues before the Court, the Court may have been obliged to raise as an issue the conduct of this proceeding by Mr Macdonald’s firm. Under the Lawyer’s and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, lawyers must observe obligations of independence in litigation. Rule 13.5.3 contains a prohibition of involvement if the conduct or advice of the lawyer or another member of the lawyer’s practice is in issue in the matter before the Court. That rule would appear to have been engaged in
this case.
43 High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).
[87] The fact that the Court proceeded with the hearing despite Mr Macdonald’s representation of the applicant in this proceeding is not to be taken as approving such involvement. As a matter of the Court’s entitlement to regulate its own process, I elected in the interests of the just and timely disposition of this litigation to proceed with the hearing notwithstanding the engagement of Mr Macdonald as the applicant’s solicitor on the record.
Orders
[88] I order:
(a) Caveat no. 10697986.1 shall lapse; and
(b)The applicant shall pay to the respondent the costs of the application on a 2B basis together with disbursements to be fixed by the Registrar;
Associate Judge Osborne
Solicitors:
MBC Law Ltd, Auckland
Ross Dowling Marquet Griffin, Dunedin
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